The Concept of Production

Question 1

Purchase of goods and services by the households for personal consumption

Answer 1

Consumption

Question 2

The father of the classical economic school of thought

Answer 2

Adam Smith

Question 3

consumption was the sole end of production, and the producer’s interest ought to be attended to only so far as it may be necessary for promoting that of the consumer.

Answer 3

Classical Interpretation of Consumption

Question 4

Disposable income (Yⅆ) refers to the remaining income an individual has after taxes and other government obligations (T) are deducted from the individual’s gross income (Y).

Answer 4

Absolute Income Hypothesis

Question 5

What is MPC

Answer 5

Marginal propensity to consume. Measures the change in consumption given a change in disposable income.

The more your income gets higher the more you can buy stuff Ex: You live with your parents because your income is not enough to rent an apartment(let’s say abt 15k), but you get a better job that gives you enough money (50k maybe) to rent an apartment so you do just that.

Question 6

An alternative to Keynes’s Production Theory made by Milton Friedman

Answer 6

Permanent Income Hypothesis

Question 7

What is the difference between the Absolute Income Hypothesis and Permanent Income Hypothesis?

Answer 7

Friedmans theory has a more long-term consideration by factoring in potential home.

Question 8

As individuals earn more income, consumption tends to increase as well.

Answer 8

Determinants of Consumption

Question 9

Is the pay for the use of money

Answer 9

Interest rate

Question 10

What is Consumer Expectation?

Answer 10

Another determinant of Consumption.

Question 11

Is a concept in microeconomics that links consumer spending to personal preferences which are, in turn, subject to the individual’s maximum utility and budget constraints.

Answer 11

Consumer Choice Theory

Question 12

Refers to Satisfaction

Answer 12

Utility

Question 13

Sets the limit to what the households can buy given their limited income and wealth.

Answer 13

Budget

Question 14

Consumer Choice Theory, Utility, and Budget are under?

Answer 14

Consumer Buying Behavior

Question 15

this means that consumers are fully aware of all options prior to making decisions.

Answer 15

Full Information

Question 15

this means that consumers are fully aware of all options prior to making decisions.

Answer 15

Full Information

Question 16

this means that consumers are fully aware of all options prior to making decisions.

Answer 16

Full Information

Question 17

this means that given two identical goods, a rational consumer is indifferent to either good.

Answer 17

Indifference

Question 18

consumers are assumed to be utility-maximizing individuals who would always prefer the option that gives the highest satisfaction.

Answer 18

Diminishing Marginal Utility

Question 19

If a consumer prefers good A to good B and prefers good B to good C, the same consumer is assumed to prefer good A to good C.

Answer 19

Consistency